US remains important market - Fonterra
Fonterra says the US continues to be an important market for New Zealand dairy and the co-op.
Sales volumes were 16.6b liquid milk equivalent (LME), up 4%. However, normalised EBIT was down 9% to $522 million.
In ingredients, sales volumes for the first nine months were up 10% to 16.3b LME, gross margin was down to 8.6% from 9.6% and EBIT was down $64m to $602m.
In consumer and foodservice sales, volumes were down 1% to 3.8b LME, gross margin was down to 22.8% from 23.6% and normalised EBIT was down $62m to $266m.
Chief executive Miles Hurrell says the New Zealand ingredients business is performing as expected but Australia ingredients continues to face challenges and it is taking longer than planned to lift performance in some parts of the co-op’s consumer and foodservice business.
“Due to the challenges in Australia ingredients and tightening relative price differences between reference products, or those products that inform the farmgate milk price, and non-reference products – that’s all our other products -- we are reducing the forecast full year normalised EBIT for the whole ingredients business to $645 - $725m, down from the $750 - $850m range we shared at our interim results.”
Consumer and foodservice improved its performance in the third quarter relative to the first half.
“Due to our performance in Latin America we have lowered our forecast normalised EBIT from $475m - $525m to $400m - $430m for this part of the co-op,” he says.
The China foodservice business recovered as demand for butter bounced back, helping pricing and in market inventory return to more normal levels.
There was good demand for Anchor Food Professionals UHT culinary cream and the Waitoa UHT factory had worked hard to get shipments to China foodservice customers.
The co-op’s Oceania consumer and foodservice business continued to perform well with Australia’s spreads category, including Western Star butter, contributing significantly to gross margin.
